Brad worked as a contractor for a year, earned revenues of $120,000, and incurred an explicit cost of $70,000. If he could have earned $80,000 working for a computer company, his economic profit as a contractor would be_____.

Question

Quizplus · Accepted Answer

Economic profit is calculated by subtracting both explicit and implicit costs from total revenues. Here, explicit costs are $70,000 and the implicit cost (opportunity cost of not working for the computer company) is $80,000. Subtracting both from the revenue ($120,000 - $70,000 - $80,000) gives an economic profit of −$30,000.

Brad Worked as a Contractor for a Year, Earned Revenues